Pre-Mining in Cryptocurrency: Early Bird Block Rewards

Pre-Mine is a situation where some or all of the initial coin supply is created during or before a public launch.

What is Pre-Mine?

Pre-Mine is the production of a certain amount of cryptocurrency before it becomes publicly available. In the cryptocurrency world, pre-mining is a practice similar to selling a stake in a company to employees before the company goes public via an initial public offering (IPO).

In terms of digital currency, coins created in advance - and reserved before the currency is launched - will create value for their owners when they become available for trading. Most of these first coins go to ICO investors, developers, and team members who contributed to the birth of the currency.

Ethereum, the second largest digital currency by market capitalization, is an example of a cryptocurrency in which a large number of coins were pre-mined before the ICO. Unlike Bitcoin, for example, pre-mined coins are usually stored in a centralized body such as Ripple (XRP). This digital currency was designed for a centralized payment system that provides faster and cheaper ways to transfer funds in partnership with banks. However, most of this cryptocurrency is owned by Ripple itself.

Some blockchain participants oppose Pre-Mine, while others consider it a legitimate practice. Its proponents argue that it fairly rewards developers and employees who participate in project development and modeling, and that it provides an incentive for them to participate.

However, Pre-Mine remains a questionable practice for many because it breeds distrust among users. Many developers pre-mine and reserve large amounts of coins before an ICO without informing the general public. Then, when the cryptocurrency launches and prices skyrocket due to a shortage of coins, these developers bring their pre-mined coins back to the market, causing their prices to plummet and damaging the outsiders.

Pre-Mine should not be confused with Premine, a cryptocurrency with the ticker symbol PMC.

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